GREEN CAPITALI$M

Stopping Sewage in London’s River Thames Draws Green Bond Demand

Ronan Martin
Thu, March 3, 2022, 

(Bloomberg) -- The green bond market just got one of its biggest challenges yet -- cleaning up London’s River Thames.

A sale of the notes aims to help to fund upgrades to the city’s Victorian-era sewers, as population growth in London heaps increasing pressure on them. Designed to serve about 4 million people, the sewers instead handle waste from more than double that number, leading to multiple sewage overflows every year.

Bazalgette Finance Plc sold 300 million pounds ($400 million) of green bonds to fund construction of a 25-kilometer tunnel to prevent millions of tonnes of sewage overflowing into the river. The 12-year notes were priced at 130 basis points above U.K. gilts, drawing investor orders of more than four times the amount on offer, according to a person with knowledge of the sale, who asked not to be named.

A spokesman for Thames Tideway didn’t immediately respond to a Bloomberg News request for comment.

The bond proceeds will be given to Bazalgette Tunnel Ltd for the ongoing construction of the Thames Tideway Tunnel, which is expected to be completed in 2023, according to the Tideway website. The 66 meter-deep tunnel is more than seven meters wide and will cost an estimated 4.2 billion pounds ($5.6 billion) at completion, according to an investor presentation seen by Bloomberg News.

Thames Water Fined GBP4m for ‘Utterly Disgusting’ Sewage Blunder

The sale is Europe’s first green bond deal since Feb. 16 and one of the the first non-financial offerings since Feb. 23, according to data compiled by Bloomberg. Marketwide sales of publicly-syndicated debt have stalled in recent days amid widespread global volatility triggered by Russia’s invasion of Ukraine.

All of the revenues financing the construction of the tunnel are from green assets, according to the investor presentation. Lloyds Banking Group Plc, Royal Bank of Canada and SMBC Nikko Securities Inc. are arranging Bazalgette Finance’s sale.

Drought-Riven Chile Makes World First in Environmental Bonds



Caleb Mutua, Augusta Saraiva and Christopher DeReza
Wed, March 2, 2022, 3:22 PM·3 min read

(Bloomberg) -- Chile issued bonds tied to sustainability goals, the first nation in the world to do so, as the country wracked by a decade-long drought looks to cut greenhouse gas emissions, and obtain cheap financing.

The government sold $2 billion in dollar-denominated, sustainability-linked bonds maturing in 20 years, according to a person with knowledge of the matter. The offering yields 2 percentage points above Treasuries after initial discussions in the area of 2.4 percentage points, said the person, who asked not to be identified as the details are private.

Chile’s government is already the biggest issuer of environmental, social and governance bonds in Latin America, with $31 billion in sales, and is now looking to boost its green credentials still further. The sustainability-linked bonds pay a set penalty to investors if the seller fails to meet certain targets -- in this case tied on greenhouse gas emissions and renewable energy generation.

The interest rate payable on the notes will be increased by either 12.50 or 25 basis points unless Chile meets its ESG goals, the person said.

The SLB offering completed the sale of $2 billion in ESG bonds the country had planned to issue last month, adding to the $4 billion raised in that format already this year. That would conclude this year’s $6 billion external markets issuance target, Cristobal Gamboni, head of the Finance Ministry’s newly created Green Finance Office, said in a February interview.

The deal is already getting strong investor demand, Gamboni said in a written response to questions Wednesday. Chile might end up issuing less debt than projected this year as the nation has raised $5 billion more than expected in revenue, he added.

Booming Market

Sustainability-linked debt is one of the fastest-growing subsets of ESG debt. Global sales of the so-called SLBs hit a record $110 billion last year, compared with $11 billion issued in 2020, according to data compiled by Bloomberg. Moody’s ESG Solutions is forecasting issuance of the debt to reach $200 billion this year.

SLBs are growing in global popularity because they can be used by a wider pool of borrowers, including those without big environmental projects, allowing them to tap a growing ethical fund industry and get cheaper borrowing costs.

Yet sovereigns have been slow to enter the market, partly due to problems setting trackable ESG goals known as key performance indicators, given the governance processes required, according to Nathalie Larrouse, climate and ESG capital markets Director at NatWest Markets. Chile’s SLBs are the first from a nation, according to data compiled by Bloomberg.

“With the improvement of data and experiences drawn from the corporate sector, we see an interesting future for SLBs in the sovereign space, particularly in the emerging markets,” said Larrouse.

Chile has been suffering from a drought for more than a decade as the northern desert expands ever further south in a move linked by many to global warming, adding to pressure on the government to take action over greenhouse gas emissions. In the last decade, there has been an explosion in the use of solar panels and wind farms as the government sets new emission targets.

BNP Paribas SA, Credit Agricole CIB, and Societe Generale managed the bond sale, the person said.

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